How can transnational corporations be held to account in a world of nation states? A binding UN treaty would be an important step.

The global economic model has failed working people. The power and greed of huge corporations have captured governments, which are acting against the rights and interests of their own workers.

The current model of trade—the bulk of it tied to global supply chains, in highly-competitive, low-cost markets—means that jobs created by transnational companies are too often based on exploitation without decent working standards. Ninety-four per cent of the global workforce of the top 50 corporations is hidden in supply chains, where the obscurity of business contracts facilitates this exploitation and too often a dehumanising oppression—even inclusive of modern slavery, along with low wages, short-term or precarious contracts and unsafe work environments.

In addition, new frontiers have emerged with the monopoly dominance of giant technology companies—with the power they exercise by controlling data—and platforms, whose business models have little or no connection to national laws, taxation systems or employment responsibility.

Decent work

Transnational business cannot and will not be sustainable unless it is based on the principles of decent work. Yet international law is not well equipped to address cross-border corporate abuses of human and labour rights. The traditional approach of obliging states to hold solely to account perpetrators of abuses within their own borders no longer corresponds to the realities of a global economy.

Companies are operating as vast de facto networks of nominally national-level entities, each protected by the corporate veil shielding them from being held accountable. Even when it comes to the subsidiaries of transnational companies, which are either directly or indirectly controlled by their parents, there is often no avenue for access to justice. When it comes to seeking remedies locally, workers continue to face enormous legal and practical barriers—not least because local companies are often deliberately under-capitalised, essentially making them judgment-proof.

Practically speaking, most workers are deprived of access to their rights as a result of the impunity of transnational companies, sustained by the absence of a legal framework that captures all business operations and activities. The 2019 ITUC Global Rights Index found workers had no or restricted access to justice in 72 per cent of countries.

Binding instrument

A legally-binding global instrument on business and human rights could help close accountability gaps and combat corporate impunity.  

What would a meaningful United Nations treaty have to include to achieve this? It would entail:

• a broad substantive scope covering all internationally recognised human rights, including fundamental workers’ and trade-union rights, as defined by relevant international labour standards;
• coverage of all business enterprises, regardless of size, sector, operational context, ownership and structure;
• extraterritorial regulation of parent companies and access to justice for victims of transnational human-rights violations in the corporation’s home state;
• regulatory measures that require businesses to adopt and apply human-rights due-diligence policies and procedures.
• reaffirmation of the applicability of human-rights obligations to the operations of companies, and
• a strong international monitoring and enforcement mechanism.

What are the chances of getting there?

In June 2014, the UN Human Rights Council (HRC) adopted Resolution 26/9, establishing an Intergovernmental Working Group (IGWG) tasked with the elaboration of an international legally-binding instrument to regulate, in international human-rights law, the activities of transnational corporations and other business enterprises.

Despite the enormous deficits in respect for human and labour rights across global supply chains, this decision was by no means a given. Following heated debates, reflecting divisions based on ideology and economic power between the global north and south, the HRC recorded a vote of 20 to 14, with 13 abstentions, paving the way to address one of the most significant shortcomings in international human rights law. 

The United States—unsurprisingly, given its sceptical attitude towards the HRC as a whole—has entirely rejected the process and has not engaged in any of the negotiations, limiting itself to sending a letter to state its opposition. The business lobby, led by the International Chamber of Commerce and the International Organisation of Employers, also did their best to frustrate the process.

Visible shift

There has however been a visible shift in government attitudes towards regulating companies and in support for a legally-binding treaty.

This month, the IGWG held its fifth session, to enter into substantive negotiations on a revised draft text published in July. Governments, for the first time from both industrialised and developing countries, actively participated in the negotiations, congratulating the chair of the IGWG on improving a previous draft. Indeed, the vast majority of governments expressed their commitment to constructively engage to achieve the IGWG’s objective.

The most significant shift came from the European Union. In 2015, during the first session of the IGWG, the EU representative left the negotiating room, having offered polarising remarks opposing the treaty process during the discussion of the programme of work. At the outset of this month’s negotiations, however, the EU explicitly acknowledged the urgent need to strengthen prevention and mitigation of adverse human-rights impacts related to business activities and to provide access to effective remediation. While the bloc still points to the absence of a negotiating mandate from the European Council, and the need for further analysis and clarification of the text, all involved actors are now aware we are on a trajectory towards binding legislation.

Several factors have contributed to the change of tune. The revised draft text has taken on board various concerns and priorities expressed by industrialised countries and the business community. Notably, the text has been further aligned with the UN Guiding Principles on Business and Human Rights, alleviating the fear that a binding treaty could undermine the implementation of the latter. Moreover, the scope of the companies covered has been clarified and broadened to be comprehensive.

At the same time, the two key tenets of effective respect for human and labour rights—due diligence (prevention) and access to remedy—feature prominently in the text. In short, the chair of the IGWG has made a clear attempt at a compromise.

Moreover, discussions at the international level have fuelled progress on longstanding campaigns at the national level. Mandatory human-rights due-diligence legislation, a key component of the legally-binding treaty,  is now on the legislative agenda in many countries, in some instances with company support. The European Commission itself is now exploring regulatory options to require businesses to undertake due diligence for human rights and environmental impacts in their own operations and their supply chains.

Urgently needed

It is now critical to build on this momentum. There is scope to improve the text of the draft further, for example when it comes to the international enforcement mechanisms and issues of trade and investment. Written comments on the revised draft can be submitted by February 2020 and, based on these inputs, a new draft is expected to be published next June. But it is time for all parties to be pragmatic, to delay no longer this urgently-needed treaty.

Most importantly, governments must firmly express their political commitment, to make a legally-binding treaty a reality—part of the foundation for a new global social contract, with the rule of law at its centre. The value of an EU directive on due diligence and remedy cannot be overestimated.

For unions and civil society, it is critical to lobby all governments, and the European Commission, and to include wherever possible that voice of business committed to change. The global negotiations are a critical focus but all governments need to take their seat at the table—with the demands of their publics providing the momentum to see the treaty agreed.